S&P 500 rebounds strongly after confirming this bullish price-volume pattern – S&P 500 could point to strong Rally ahead

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The S&P 500 rebounded strongly from its May 20, 2022 swing low, which Wyckoff sees as a change of character to halt the downtrend that began in April 2022. Whether the current rally will mark the May 2022 low as a market bottom is disputed among analysts and economists, sources said.

S&P 500 Continued Bullish Signs

Outside of the supply zone, the S&P 500 responded last week with an increase in volume, signaling the presence of supply. This is the main difference between the current rally and the March 2022 rally. See below.

In March 2022, a modest rebound was a slight move, reflected in low volumes indicating little supply.

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The current rally attracts supply on May 31, 2022 and June 1, 2022, as overall market sentiment remains bearish. However, a small pullback between 4070-4200 as volume decreases (marked with orange arrows) could be a sign of potential supply absorption. While there is no positive demand, the S&P 500 is likely to move higher once the selling momentum runs out.

If the S&P 500 continues to consolidate in the 4070-4200 range with less volume (marked in green), a break above 4200 and challenge the next resistance and supply area (marked by the pink line) between 4300-4400 is expected as the first target price.

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According to the scatter plot below, enough causal relationships have been established over the past month to warrant a higher target.

For a bullish case currently developing, a price target of 4470 (marked in green) that coincides with previous resistance can be used, followed by 4610-4890 (marked in orange) based on pip and digital price target forecasts.

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The point-and-figure chart shows that there is enough fuel in the tank that the S&P 500 could even reach new all-time highs. Despite the current bearish sentiment, don’t be surprised if the S&P 500 is poised for a strong rebound after supply absorption is complete.

A break below 4050 and a spike in volume would hurt the short-term bullish case for the S&P 500.

Confirming market bottoms using the Wyckoff method
It is important for traders to take the right opportunity to trade with the market direction when looking for potential market bottoms or signs of failure. Watch the video below to learn how to use the Wyckoff method and stock market breadth to spot and confirm market bottoms.

The short-term direction for the S&P 500 remains open unless proven otherwise. As you ride this upward wave, there are clear signs along the way. Everyone can interpret market information in order to make the right trading and investment decisions.

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